“Shifting your thought consumption…”

Everyone knows who Wesley Snipes is one way or another. I personally remember him from Liberty Stand Still, which was a movie about how he holds a executive of a gun manufacturer hostage by sniper. (Picture)

Well this movie had an obvious bias against gun companies and I personally think the gun companies shouldn’t be held responsible for people shooting other people.

Well today, I read a story on Drudge Report about how he has not paid taxes and he is on trial with the two biggest tax protestors of the world.

I will try to keep this post short but here are some funny things from the court case (My comments are in blue):

"Nobody likes paying taxes, but paying taxes is the price we pay to live in a civilized society," Assistant U.S. Attorney M. Scotland Morris said Tuesday in closing arguments. "And it’s the law, and that’s what this case is about. It’s about three men who felt they were above the law."

I love how this is his case. That it takes taxes to create a civilized society. Sure it is the law and if the law says that you have to enforce it. This is saying that an uncivilized society is one that does not pay taxes.

"In lengthy filings to the IRS, the three defendants claimed they did not legally have to pay taxes, citing an obscure section of the tax code that establishes that foreign sources of income for U.S. citizens are taxable. Protesters take that to mean only foreign sources are taxable, and wages made in this country are not."

I laughed so hard when I read this…

"The three men claimed the IRS is not a legitimate government agency. Snipes also argued in long, bizarre letters that he was a nonresident alien; that the IRS terrorizes and deceives citizens; and that efforts to prosecute him would cause "increased collateral risk."

This I actually agree with I think the IRS is such a bad organization. James Bovard’s book Lost Rights illustrates that well but that is for another post.

"Cohen, the former IRS commissioner, said trials like Snipes’ are important to discourage potential tax scofflaws from defying the government.

"Locks are important on windows to keep honest men from becoming thieves," Cohen said. "Because a thief can get into a window even if it’s locked, right? But you do that as a deterrent."

So this is just a trial for deterrence? He makes it sound like they don’t want to prosecute people for tax evasion but they have to because they need to set an example.

So what does everyone else think?

IRS good or bad?

Do we need taxes to create a "civil s0ciety"? Or to put another way are taxes a price of a civil society?

The quality of my life is something I take pretty seriously. I am always trying to maximize my experience in everything I do (though I don’t always succeed). Since I feel I’m not alone on this, I thought I would share something interesting:

In 2005 the Economist magazine published a list of nations, ranking them in order of providing the greatest quality-of-life to citizens. This ranking system considered factors such as: GDP, income per household, life expectancy, freedom of speech, social equality, law enforcement and so on.

Here are the top 5:

1 Ireland

2 Switzerland

3 Norway

4 Luxembourg

5 Sweden

Also noteworthy…..

13 US

14 Canada

29 UK

60 China

So why exactly is the US not #1? The average American makes more money than the average Irishman, has greater personal wealth, and lives in the land of the free and home of the brave. But maybe money isn’t everything. The Irish live far longer, drink cleaner water, eat healthier, deal with less pollution, pay fewer in taxes, and enjoy similar social freedoms as Americans. Also, the Emerald Isle is boasting an extremely robust and hardly-restricted form of capitalism. This means that the Irish aren’t enjoying conditions that were produced by some form of socialism.

Then again, this list is by no means perfect. While I try to improve myself and my environment whenever possibly, I must be pragmatic. The US has long led the fight to keep capitalism and democracy a significant part of this world. Many nations today owe their sovereignty to the US. We Americans have it pretty good these days; and there are far more countries wanting to be the US, than those looking down on us. But that’s my opinion, what’s your’s?

The Phillips Curve was created in 1958 by A.W. Phillips after he published an article in Economia. He found a relationship between unemployment and inflation. He found that:

Years with high unemployment had low inflation

Years with low unemployment had high inflation

This is illustrated by the graph below:

As you can see in year red inflation is 6% and the unemployment rate was 2% and then in year blue inflation was at 4% and unemployment was at 7%.

The data they used was from the United Kingdom, but they also found this correlation with other countries.

This was a dream come true for policy makers and politicians because now they can take care of the two killers of the economy.

Milton Friedman then came along and published "What Monetary Policy Can Do" and "What Monetary Policy Cannot Do." Where he found that this was only true in the short-run, like I mentioned in the last post. Right after that Edmund Phelps came out in agreement, that there was no such thing as a long term trade off between inflation and unemployment.

They said the graph actually looked like this:

Notice that no mater where you put the inflation rate the unemployment rate will stay the same in the long run. I believe this is due to things like artificially inflated wages.

So now in the long-term all you have is high inflation and because people expect the change in the Phillips Curve.

You say "So you taught me the Phillips Curve, now what does that have to do with the economic stimulus plan?"

The point is to look at government programs to stimulate the economy with a very weary eye because they do not always look into your long-term interests.

Like trying to help the people who have bad loans. In the short-term it helps Johnny Moore keep is house, but in the long-term it says to the consumer; keep making bad loans don’t worry the government using the rest of Americans money will bail you out.

Information mostly from Principles of Macroeconomics by N. Gregory Mankiw Third Edition

People have asked me over and over, what do I think about the new economic stimulus plan?

My answer is leave it alone. This may be a very overly simplistic view of how we should handle our recession but I feel like it is the correct one.

Even if there was someway to fix this (maybe or maybe not) slide into a recession government is no equipped to figure it out nor have the economic incentives to do so.

On the first day of class in economics I learned the third guiding principle and that is "Incentives matter." When a persons potential benefits go up, it increases there chance of choosing something. if a persons potential costs go down, it decreases it.

Lets keep this in mind and see if you reach the same conclusion I do.

A politician wants to keep his job and keep being re-elected (Benefits up). How does he maximize his "political profits"? He wins votes. How does he win votes? By making people happy.

There are many plans in economics that help people in the short term but not in the long term. Is a politician worried about the long term? Are people educated on economics and worried about the long run?

The answer to both of those questions are no. They becoming an even larger no, when many economists suggest that the politician should do nothing and let the economy rebound. Instead of lightening the effect of the recession in the short term and hurting us in the long term.

People by nature need to be in control…

Like I like to choose what car I drive, where I go, and what I watch on T.V. These are my rightful personal choices.

Then we gain power and we start making choices of our kids, their school and their life.

This is all good and fine, but why do the voters and citizens turn to politicians to fix the economy? We hold our hands out and say if we only told Joe Smith to go make more corn for our ethanol vehicles, our world will be better off.

Well considering Joe is a theatre major, he has no interests of doing so. This is when the controlling central planned socialist inside people kick in. That’s when you tell Joe to work there or you give him money too.

The first policy being the Soviet Union, the second one being a democracy.

Both are shifting comparative advantage to inefficient ways. Both are wrong…

Sometimes I feel like I am the only person that sees this…

Back to short-term/long-term plans that do not work. The classic economic example is the Phillips curve.

Stay tuned for "People are socialist by nature part II"

Specifically looking at the Phillips curve and how it effects the short term and the long run.

The remains of ancient life has become one of the most significant commodities on the global market. It takes the form of oil, a crude liquid that has a nearly unlimited number of applications in modern life. For about a century, the black gold has been one of the most consumed natural energy resources by Americans. As of late 2007, the US consumes about 20 million barrels of unrefined oil per day. A controversial 12 million of those barrels, is imported from foreign soil. It’s occasional for Americans to debate whether or not importing oil is a threat to our security and economy. Lately though, oil companies and government scientists have re-evaluated the oil-consumption situation; as part of a continuing process of monitoring production/consumption levels.

Geophysicists working for oil corporations continuously measure the levels of oil resource remaining in major fields. These records have been used to circulate predictions of mixed accuracy. While predictions concerning consumption rates are inevitably uncertain, production expectations are highly predictable. Virtually all production-predictions agree that international oil production will fall permanently between 2010-2040. This outlook is not certain though, as technology could possibly increase production potential. Either way, international oil production will eventually peak, and fall forever.

While this may seem like a terrible future, I feel that this will not spell doom for western societies. As the cost of oil rises due to supply and demand, demand will also rise for alternate energy technologies. Our knowledge of physics increases at an exponential rate, and technology as well. The real question is, will technological advancements come in time to alleviate economic hardship. I feel it will, but what are your opinions?

Everyone knows that when you get on an airplane that you are no longer allowed to use cell phones.

In fact, in the very first episode of the West Wing they have an issue like that. Toby Ziegler, the White House Communications Director, is on a plane when he finds out President Bartlett has been in an accident and he is unable to call to the ground because they were about to land. Toby has a hard time believing that something he bought at Radio Shack could bring down a brand new Boeing plane.

There is good news for Mr. Toby Ziegler, planes are beginning to allow text messaging and Wi-Fi on planes. The Economist is even reporting that soon there will be cell phone calls on the planes.

Planes with phones would probably cause people to be loud and keep others from sleeping. When it comes to texts and emails then it would be less intrusive. Will this stop people from wanting calls on the planes?

Should we support this because it would increase productivity of business people?

Or is this a pure case of externality?

By definition from the Economist online dictionary:

"Externalities are costs or benefits arising from an economic activity that affect somebody other than the people engaged in the economic activity and are not reflected fully in prices."

The person next to you is catching all the benefits from using the cell phone while the person sitting next to you is getting much of the cost.

What should be done?

My suggestion would be to have a separate section for business people who want to use cell phones and others who just want text messaging and email.

While looking for a quote for yesterday’s post I found this one and I thought I would share it and bring up an important issue.

"Perhaps the fact that we have seen millions voting themselves into complete dependence on a tyrant has made our generation understand that to choose one’s government is not necessarily to secure freedom."

-F.A. Hayek

Just a little thought on this quote… this definitely applied to areas like the Middle East and also tells the U.S. government that the first priority in the Middle East should be Economic freedoms not elections. We celebrate when Iraqi’s vote but we don’t celebrate when the first Iraqi sells bread to another without having to worry about price controls or government intervention for a tyrant.

I’ve mentioned this before when I discussed Larry Iannacone’s works on religious freedom and how he mentioned in his lecture that he believes that we should be more focused on that than democracy.

Should we install Religious freedoms before democracy? Should we install Economic freedoms before democracy?

Could one argue that what President Putin in Russia is doing is removing some democracy a good idea?

"Samina Malik, a slight 23-year-old in a headscarf, last month became the first Muslim woman to be convicted of a terrorism offense in Britain when she was found guilty of collecting library of jihadist manuals from the internet. This week Miss Malik, who worked at an airport bookstore and called herself the "lyrical terrorist" in online forums, was given a suspended nine-month prison sentence and community service."

This is from the Economist and an article I found interesting, in relation to America’s Patriot Act. Britain has a Terrorism Act and she was violating section 57 possessing any article "for terrorist purposes."

Is this a violation of our first amendment rights? Will the United States and other countries begin to monitor what you search?

If someone is doing a research paper on jihadists they could be in trouble with the law…

I am sure there are terrorist who use the Internet but where do we draw the line?

"I don’t think government can improve economy. If government intervention can improve economic performance and get us out of recession, is it not stupid to wait for recession in order to capture the benefits of government economic policies? But then, if government intervention can improve economic performance and increase the rate of growth, how come socialist/welfare states consistently perform worse than free-market economies?"

-Steve Pejovich

Now to the Poll Results…

Of the three who have been winners so far, Who is your favorite?

Mitt Romney 61%

John McCain 22%

Mike Huckabee 16%

New Poll

Which of these do you feel needs the most improvement/adjustment, if any?